Employers get creative to cut insurance premiums

Annual health insurance premium increases are leading employers to look for creative ways to reduce their costs. Predicted rate increases in 2013 are smaller than in recent years, but any increase takes its toll, sometimes even making employers delay hiring new employees or expanding their operations. Factor in a shaky economy and an uncertainty about how health care reform will affect rates in coming years, and employers are taking a hard look at ways to reduce their burden.

Understanding the factors that affect rates is an important part of reducing costs. Employees’ poor health habits, like smoking and weight, and expensive catastrophic health events, like cancer and heart attacks, play a large role. A company with unhealthy employees and expensive health claims costs the insurance company more money, which in turn is passed back to the employer in the form of higher rates the following year. Since these factors are not easy to adjust quickly, employers focus on parts of the plan they can change.

One common strategy is to put more of the burden on employees. An employer might direct more of the costs to the employee for dependent coverage or make parts of the plan voluntary, such as changing the dental and vision to an optional benefit. Most common is for an employer to raise the deductible or the out-of-pocket maximum (or both), making the premium less expensive overall but increasing the amount of risk for the employee. These strategies are not popular with employees because they take more money out of their paychecks or make them feel more vulnerable.

In addition, high deductibles health plans and health savings accounts are becoming more popular as a way for everyone to share the burden because employees have to pay out of pocket for health expenses until they reach a threshold where the insurance kicks in. Employees sometimes still feel like they are getting fewer benefits than they were before, so some employers are becoming more creative with the changes that need to be made.

An example: One recent client of mine, a small-business owner, saw a 10 percent increase to her employees’ premiums, so she decided on a more long-term strategy. She would create a better-living program and reward employees who participated in the program. The program included things like joining a gym, taking a detailed health screening, quitting smoking and taking a weight-management class. This encouraged the employees to not only become healthier but to become active participants in the effort to reduce future costs.

No matter the changes an employer makes in benefits, the best strategy to reduce costs should include having an agent explore other insurance carriers and plans in order to find the best value and package to meet an employer’s needs. This should be done annually because carriers have become so competitive that the best option last year may not be the best option this year.

Eric Jans owns Eric Jans Insurance Agency in Nashville, which focuses on health insurance for businesses and individuals. He can be reached at ericjans@ericjans.com.